"Albania is no longer the white spot on the map of Europe as which it has been perceived", writes German Albanologist Peter Bartl in his book Albania (Munich, 1995). Looking back at the 1990s, Albania has however faced difficult and turbulent times. Before 1990 it was still the most isolated country in Europe. Unlike in other countries of Central and Eastern Europe, efforts to introduce democracy and to build the foundations of a market economy received a drawback when the economy collapsed as a consequence of criminal pyramid schemes in 1997. The country was further haunted by lawlessness and a desintegration of public administration. In 1999, it was faced with a huge burden, when hundreds of thousands of refugees fled to this impoverished country from neighbouring Kosovo. At the height of the crisis, Albania hosted over 460,000 refugees, which attracted widespread admiration. Despite the dramatic events, the 1990s were also a decade promising a "return to Europe" of Albania. The main role in facilitating this return lay in the hands of the European Union.

Relations between the European Union and Albania were set on a new basis in 1992, when a Trade and Co-operation Agreement between the EU and Albania was signed. Albania became eligible for funding under the EU Phare programme and received subsequently EU funds under the external relations' aid scheme (1021 million Euro in the period 1991-2000). While in the first years it became apparent, that funding was given to Albania with very little long-term strategy, in 1997 Albania came under the umbrella of a regional approach strategy. This implied, that political and economic conditionality was inroduced for the development of bilateral relations. In 1999 the EU proposed a new Stabilisation and Association Process (SAP) for five countries of South-Eastern Europe, which included Albania. The EU commissioned a feasibility study on its plans for a new Stabilisation and Association Agreement with Albania. As a result, Albania was offered Autonomous Trade Preferences with the EU in 1999, which was followed in 2000 by an extension of duty-free access to the EU market for products from Albania.

In the year 2000, after the EU opened accession negotiations with all ten candidate countries from Central and Eastern Europe, the overall philosophy of EU relations with the countries of South East Europe was adapted to the enlargement process. In June 2000 the EU Council of Ministers stated at the summit of Feira during the Portuguese presidency, that all the countries taking part in the Stabilisation and Association Process (SAP) are "potential candidates" for EU membership. One year later, in 2001, the Commission suggested that it is appropriate to conclude an Stabilisation and Association Agreement with Albania. Negotiations for the SAA with Albania started during the Belgian presidency in the second half of 2001.

The financial assistance provided by the European Union was focused primarily on balance of payment support or specific budgetary assistance linked to sectorial reforms (agriculture, public administration). A further priority was funding related to refugee costs during the 1999 Kosovo crisis. The European Commission summarised its funding objectives for Albania as follows:

• To bring Albania closer to EU standards and principles, and to prepare the country for gradual integration into EU structures in the framework of the Stabilisation and Association Process.
• To help the Albanian authorities in consolidating democracy and implementing the rule of law.
• To assist the government of Albania in its efforts to achieve a comprehensive administrative and institutional reform.
• To facilitate the process of economic and social transformation towards an efficient market economy.

 Source: European Commission

Out of the 1021 million Euro provided by the EU to Albania in the period 1991-2000, the EU's Humanitarian Aid Office (ECHO) has provided around 140 million and sectorial programmes amounted to 404 million Euro. The following overview provides annual figures for the flow of Phare funding from the European Union to Albania.

The total amount of Phare funds allocated to Albania for the period 1991-2000 reached 631,5 million Euro. These funds were managed by the Commissions' Directorate General (DG) for External Relations. In addition to this project based grant funding, other DGs provided other funds, e.g. 120 mio. Euro in Agricultural food aid in 1992 from DG Agriculture, and 16,5 mio. Euro in 1997 and 1999 for food security from DG Development. In 1999 the DG Economic and Financial Affairs provided 20 mio. Euro for macro-financial assitance. Since 1995 Albania has also received small scale funding for human rights projects (overall 3,5 mio. Euro) and 1,5 mio. Euro for OSCE election support in 1997.

The European Investment Bank has given three credits to Albania, 29 mio. Euro in 1995, 22 mio. Euro in 1998 and 34 mio. Euro in 2000, totalling 85 mio. Euro. In 2001 Albania received an additional credit of 40 mio. Euro.

The European Union has identified a number of key areas for its aid programmes, into which Phare funds have been chanelled. It its funding priorities, the Commission has identified the following priorities:

• Strengthening of public administration and judiciary
• Police and public order
• Customs
• Statistics
• Development of infrastructures

From the beginning, infrastructure projects such as the improvement of rail and road networks and the modernization of drinking water systems have received top priority. The improvement of public infrasructure has focused primarily on small projects in local community development. Projects relating to the provision of water, primary education and health have received highest attention. In the area of agriculture, the EU has provided support for land mapping, fishery sector, veterinary control, and also limited amount for technical assitance for policy advice. In the area of university education, Albania received funding in order take an part in the EU inter-university exchange programme TEMPUS. Albanian universities are collaborating with their EU counterparts in joint projects and individual mobility grants for students and professors are being provided.

The EU has laos provided funding for cross-border co-operation programmes. These projects were designed to offer opportunities to open up the country and develop closer links with its immediate European Union neighbours, Greece and Italy.

The Albanian-Greek border region is isolated, rural and mountainous. The main economic activity is agriculture and the region suffers from labour market problems and unemployment, and consequently a high level of emigration to Greece. The Cross-border co-operation programme provided support to overcome the socio-economic gap between the bordering Albanian and Greek regions.

The Albanian-Italian Cross-border co-operation focused on the regions of Albania which have a common maritime border with Italy, in order to improve and expand transport infrastructure.

The Albanian-Montenegrin border has not received much attention due to the difficult relations of the Federal Republic of Yugoslavia with the European Union in the early 1990s. A comprehensive policy study on the subject has been elaborated by OSI Fellow Aldo Bumci, who focused his research and policy recommendations on this neglected Cross-border region.

With the design of the Stabilisation and Association Process in 1999, the European Union introduced its CARDS programme, which replced the previous PHARE programme for the region. CARDS stands for Community Assistance for Reconstruction, Development and Stabilisation. The CARDS programme thus became the main channel for the European Union's financial and technical co-operation with the countries of South-East Europe.

The future funding priorities of CARDS assistance to Albania will support the Stabilisation and Association process especially in areas known from the PHARE funded priorities in Central and Eastern Europe, such as Justice and Home Affairs issues, strengthening of Public Administration, EU internal market-related areas, environmental protection etc.

It is therefore interesting to note, that the SAP intends to follow a similar logic like the accession process of the CEE candidate countries. A study of EU funding to Albania and Macedonia commissioned by the European Commission in the year 2001 showed however, that EU aid to Albania has not been effective due to large-scale mismanagement of funds. Both planning as well as projects implementation have been severely criticized. The report states, that the Albania programme of the EU suffered by extremely bad management. Alhough water management projects have been on the priority list since the early 1990s, only one of six projects has actually been completed. Road reconstruction has neglected the stated objectives of local infrastructure development - instead of reliable domestic communications only large scale projects like a motory to Greece have been completed. The EU Court of Auditors report of November 2001 staed that the main reason for the insufficient management are unclear funding priorities and a lack of coordination within the European Commission.

 In her excellent account of Western aid to Central and Eastern Europe, US author Janine R. Wedel, in her excellent book "Collision and Collusion / The Strange Case of Western Aid to Eastern Europe" (Palgrave, New York, 2001, p.33f) pointed out some of the characteristics of management of PHARE (and USAID) funding to the region:

A lot of the described problems can be applied to the the region as a whole, as the delivery of PHARE funds was regulated by a central set of rules from Brussels. Each recipient country has its own specific problems however. In the case of Albania, the development of PHARE into the CARDS programme might have taken previous experience with management problems into account, the devastating report from the Court of Auditors of November 2001 suggests, that the problems are to be found in the systém of EU aid delivery itself.

What can be done in order to address the underlying problems of mismanagement of available funds and a more strategic approach to the region. One of the key actors of the stabilisation process in South-East Europe, former Austrian Vice-chancellor, chairman of the South East Europe Cooperation Initiative (SECI) and recently appointed new coordinator of the EU's Stability Pact Erhard Busek offered some concrete proposals in his book "Österreich und der Balkan" (Austria and the Balkans, Vienna 1999, p. 206f):

Busek argues, that these areas are being left more to coincidence than to serious planning. His arguments focus on the need of education and support for human resource development in order to stabilize the democratic institutions and to develop a human potential which will be able to strengthen civic institutions, public administration and a civic society.

The priority of funding for Albania must be directed towards making the country economically stable and to provide structures to support democracy and the rule of law. The European Commission's assessment of developments in Albania between 1999-2001 is generally positive, it points out however, that the process of transformation is only beginning:

In order to address these challenges and make the available funding to Albania more effective this paper suggests the following draft policy recommendations:

The experience of CEE candidate countries shows that exchange programmes like Socrates/Erasmus have had a very positive impact on both the level of university education, motivation of students. They have also applied pressure on university administrations to open up for exchanges, adapt curricula for visiting students and provide adequate programmes. For Albania this means that not only Albanian students will be able to study abroad, but also that students from the EU and candidate countries will come to Albania to study for an exchange semester, creating important human ties, and commitment to the country. Such an investment in creating friendships is the basis for successful implementation of partnership projects and true exchange of experience and know-how. Funds invested into exchange students are often of more use than expensive short-term technical assistance, involving hotel costs and per diems. As an example, the cost of one student to stay in Albania for one semester equals the expense for a five day visit to Tirana of a PHARE funded consultant.

Create a Team Europe of committed officials and experts in Albania

Public Policy Scoreboard

A special project should be designed to fight clientelism and corruption in the Albanian civil service system. The emphasis should be on rewarding the quality of the actual service-output, which the individual civil servant or the respectiove office delivers. A special prices for best practice should be considered.